Government regulation: Even worse than we thought

By Scott Sumner

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I’ve done a number of posts discussing ill-advised government regulations that prohibit a free market in kidneys. In the past, I’ve cited estimates that these regulations kill 5000 Americans each year. A new article by Frank McCormick, Philip J. Held, and Glenn M. Chertow, published in the Journal of the American Society of Nephrology suggests the actual cost may be nearly an order of magnitude greater, perhaps 43,000 excess deaths per year:

That’s nearly a million excess deaths since 1988, and perhaps another 465,000 more over the next decade. While these estimates are certainly imprecise, even the possibility that the cost of regulation is in this range is truly frightening.

I encourage readers not to let the media set the agenda. The media will tell you that Brett Kavanaugh was the most important issue in 2018 and that the 4500 American soldiers who died in the Iraq war was the biggest American policy disaster of the 21st century. In fact, many of the issues of greatest importance are rarely even discussed by our media or by politicians. These include:

READER COMMENTS

Chris

Dec 31 2018 at 6:33pm

I take your larger point, but to put Kavanaugh and the Iraq War in the same sentence if pretty misguided, even if we are “only” talking about 4,500 lives in the case of the latter. However, that’s a pretty blinkered reckoning, too, as you don’t note:

I don’t mean to imply that you were suggesting an equivocation between the Kavanaugh hearings and all of the above, but it a curious pairing.

Further, that you downplay the overall consequences of the U.S.’s response to 9/11 makes one less likely to give you any benefit about the costs you suggest are incurred in the list you provide.

I would submit that by most any measure, the Global War on Terror (insert your preferred nomenclature) WAS one of the worst U.S. policy disasters not just of the 21st century, but of the last 40 years.

Scott Sumner

Dec 31 2018 at 8:52pm

Chris, I think you misunderstood. It’s the media that treated Kavanaugh as the most important story of 2018, not me. I certainly agree that it doesn’t fit with the Iraq War.

It’s the American media that cares a lot about the death of American soldiers and hardly at all about the death of people in developing countries. Also, the death toll of Iraqis is hard to “counterfactual”, as Saddam was already a mass murderer of his own people (and Iranians too) even before the US invasion. In contrast, the cost in terms of US soldiers killed (and injured, as you correctly point out) is easy to estimate.

You said:

“Further, that you downplay the overall consequences of the U.S.’s response to 9/11”

Not only did I not downplay these costs, I never discussed them at all.

You said:

“I would submit that by most any measure, the Global War on Terror (insert your preferred nomenclature) WAS one of the worst U.S. policy disasters not just of the 21st century, but of the last 40 years.”

I agree, with the caveat that it be counted as “one” of the worst. But it’s still no where near as bad as the disastrous policy of banning kidney markets. And again, I never discussed the global war on terror.

BTW, I don’t view the war with Afghanistan as a US policy mistake—they attacked us.

Chris

Jan 1 2019 at 9:55am

Scott,

Thanks for your reply. I do realize that you were attributing views to the media. However, I also inferred from that paragraph what I took to be your own views. Maybe that wasn’t warranted, but the conjunction of examples (Kavanaugh, Iraq War) struck me as curious. More so now that you note your agreement that the Iraq War was one of the most disastrous policy efforts in recent U.S. history.

Allow me to rewrite your examples as follows:

“I encourage readers not to let the sports media set the agenda. The media will tell you that Klay Thompson was the most important player in the 2018 playoffs (insert whatever obviously wrong answer you find a better comparison) and that Kareem Abdul-Jabbar was the best basketball player of all-time (insert any player you think is “one of” the best, but clearly not the greatest).”

I realize in the most literal sense, you’re only attributing views to the media. However, I would hope you cold see how a reader might conclude that you view each position as wrong, perhaps almost equally wrong. I thought the latter view (in both the real and hypothetical cases) was a lot more warranted, and wanted to make that clear.

Now that you’ve agreed that Kareem is “one of” the greatest players ever, even if notably behind Michael Jordan, the disjunction between the examples you chose seems ever clearer. Perhaps I’m wrong and you find the Kavanaugh more important that I’m assuming. However, I suspect that you think the media is much more wrong about Kavanaugh’s importance than about the Iraq War. Further, I think it’s worth not blurring that distinction, even inadvertently.

***

Regarding your views of our efforts in Afghanistan, I find your response “they attacked us” refreshingly contrary to my expectations of a classical liberal/libertarian economist. I think we would have notable disagreements about what constitutes a “they” in terms of nation-states and sovereignty. Still, though, I appreciate the clarity there. I also regularly enjoy your posts. Thanks for all of your efforts and Happy New Year.

Alan Goldhammer

Jan 1 2019 at 9:48am

There was an excellent story in the New York Times the other day on the costs of cosmetology licensing. In Iowa the education requirements are so perverse (thanks to a strong lobby keeping them that way) that students are going into debt to fulfill the requirement. Everyone focuses on Federal regulations but it really is at the state and local levels that the most damage is being done.

In my ‘biased’ reading, points 1, 3, and 4 got a lot of print this year. Adam Tooze’s fine book on the 2008 catastrophe is certainly worth reading for point 2.

Scott Sumner

Jan 1 2019 at 1:35pm

Chris, I doubt we disagree on the nature of nation-states. The Taliban ruled Afghanistan in 2001, and they were closely allied with Al Qaeda. They had the option of changing their minds after the 9/11 attack, and chose not to. We were correct in removing them from power in punishment for their alliance with Al Qaeda.

When two organizations are in alliance, and one attacks you, and the other provides military protection for the aggressor, then the attacked country is effectively at war with both. It’s actually pretty simple.

Chris

Jan 1 2019 at 1:54pm

The limits you implicitly place on your last paragraph opens the door to our disagreement. First, the Taliban was far from the only organization in alliance with al-Qaeda. Second, it is an open question whether our ROI comes close to justifying all the costs I mentioned in my first response. I’m surprised that your “it’s actually pretty simple” statement shows no evidence of thinking at the margins on this one, though “effectively” is doing some heavy lifting in the preceding sentence (and allows for one to claim that invading Afghanistan may be justified regardless of any decisions regarding other organizations who were allied with al Qaeda).

Mark Z

Jan 4 2019 at 12:27pm

The Taliban, though, was more than merely allied with Al-Qaeda but were actually harboring its leadership. It would’ve been impossible to take meaningful punitive action against Al-Qaeda without going to war with Afghanistan’s government. One might contrast this with the situation in Pakistan, where, though the government there also often harbored Al-Qaeda, it also (if grudgingly) allowed the US to take specific military action against it within their borders.

If the US had eschewed regime change as a goal in Afghanistan and stuck to retaliation as its objective (which may have been the correct thing to do), it’s likely the only difference would be that the US would’ve just left sooner – but not necessarily much sooner, as even the retaliatory objective could only be said to have been completed (ironically in Pakistan though) in 2011.

Benjamin Cole

Jan 2 2019 at 12:34am

In general I agree with this post.

But let me snipe anyway.

The math on Trump’s trade tariffs suggests any economic impact is and will be trivial. We are talking increased taxes on a minute fraction of goods used in the US. Rarely mentioned today is that steel prices are lower now than 10 years ago, even in nominal terms.

Not only that, there is evidence that China is “eating” the Trump tariffs, that is, cutting export taxes, increasing subsidies and other measures, resulting in little price hikes in the US. In brief, taxes formerly paid on Sino exports to the Communist Party of China are now instead collected as tariffs in the US—-a clear win for the US taxpayer. The yuan is down about 10% in the last year, btw.

For some reason, the media has made a mountain out of Trump trade tariffs (and so has the US macroeconomics community), even resurrecting (incorrectly) the Smoot-Hawley US Great Depression bogeyman.

In truth, tight-money made the Great Depresion, helped by NRA regs and then in a distant feeble third (and that a maybe) very weak an perhaps toothless international trade restrictions. See Doug Irwin.

Today, property zoning is a structural impediment that dwarfs Trumps tariffs. Even the routine criminalization of push-cart motorcycle sidecar and truck-vending is a bigger issue.

Side note: The Atlantic recently had a long-form article on Robert Lighthizer, the US Trade Rep. I think Lighthizer is “wrong” in that he wants to reduce China influence. Good luck with that—it is inevitable. I think Lighthizer is inadvertently “right” given massive and soaring and chronic current-account trade deficits.

But my point in mentioning the Lighthizer article is that the author reveals that The Atlantic is owned by “Apple money.” Steve Jobs’ money.

As we all know, Apple makes its equipment in China.

That is one small reason why I say multinationals can pour unlimited funds into media, academia, think tanks, foundations, trade associations, lobby groups and even directly into political campaigns, and that they are effectively mouthpieces for the Communist Party of China. The media speaks for multinationals.

GM makes more carts in China than in the US, and China’s domestic market will soon be bigger. What would you expect GM to say? Or any organization to which GM belongs (or BlackRock or Apple etc.)

So Trump tariffs are the biggest issue ever.

Property zoning? Not so much.
//www.econpol.eu/sites/default/files/2018-11/EconPol_Policy_Brief_11_Zoller_Felbermayr_Tariffs.pdf (put http: in front of this link. )

Dustin

Jan 3 2019 at 12:22pm

There are the easily measurable direct costs of the tariffs. And then there are the difficult to measure indirect cost associated with the unpredictability of Trump. Trump’s willingness to destabilize the world, lashing out for what is often little more than egoism, has far reaching ramifications in our collective confidence in how the next few years may play out. This isn’t significantly different than arguments describing the importance of forward guidance relative to monetary policy.

Unpredictability = risk

Rajat

Jan 2 2019 at 1:32am

Off-topic, Scott, but you may wish to review and comment:
How Prevalent Is Downward Rigidity in Nominal Wages? International Evidence from Payroll Records and Pay SlipsMichael W. Elsby, Gary SolonNBER Working Paper No. 25393Issued in December 2018http://nber.org/papers/w25393

Rajat

Jan 2 2019 at 1:35am

Off-topic, Scott, but you may wish to review and comment: http://nber.org/papers/w25393

Scott Sumner

Jan 3 2019 at 4:51pm

Rajat, Thanks. I suspect there is some error in the study. My wage fell this year, but only because I moved to a new position at Mercatus. I doubt that 18% of UK workers received nominal wage cuts—other studies I’ve seen suggest that nominal wage cuts are very rare.

Comments are closed.

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